Sport-Traxs Marketing Strategy - Essay Example

The Marketing Strategy Process It would appear that Sport-Trax does not have a structured Marketing function. This assumption arises from the incident in which a sales person is able to discuss such important operational matters with the Head of the company, as to who should service a prime account, without colleagues in other key positions being present. The absence of structured Marketing in Sport Trax is also apparent from the fact that important tender enquiries arrive at the desk of a Commercial Manager! The question of how the company should implement Marketing Strategy is easier to answer than the crafting of strategy itself. A business of the size of Sport-Trax, being a relatively new entrant in a market affected by an economic downturn, is a recipe for the kind of disaster it has just experienced, if it tries to function without professional Marketing! Observations about product augmentation show that company personnel do have a degree of awareness of the basis tenets of Services Marketing, though these concepts lack organizational support and consistency to make them work. Marketing Strategy is a part of an ongoing process. It will not materialize spontaneously, and requires focused competence. Sport Trax does have the option of outsourcing its entire Marketing function, but it will not be productive to have sales people drifting in the market without strong procedural guides and controls. The justification for a formal Marketing function, whether within Sport-Trax, or in the form of an empowered consultant organization, will be easier to make if we could leave the immediacy of Sport-Trax’s travails and consider the series of steps that any organization must pass before it can have a working Marketing Strategy in place (Hammond, 1994, pp 97-154) . An environmental scan is an essential first step in crafting Marketing Strategy. Sport-Trax seems to have carried out this step, though there is no evidence of its formal and systematic documentation or use. We know that the market growth for sports surfaces is affected by a general tightening of belts in the economy. The influence of Athletic Associations and the effects of spikes on surface durability are other vital pieces of information that only formal scans would normally show. Sport-Trax would obviously know about the consolidation moves of its most important rival, where company employees were once employed. What does Sport-Trax lack if it already has a fair idea of the environment in which it operates? The answer lies in the processes of Segmentation and Targeting (Payne, 2002, p 94-121). Sport-Trax is aware of its strengths in athletic tracks and is also aware that it has a technological edge. It is willing to supplement its tangible product features with service elements. However, it has left yawning gaps in terms of customer definition and designing offers that meet target customer needs in a sustainable and competitive way. This lapse is evident from the fact that Sport Trax did not test its new and more durable product with a key customer, apparently made no effort to include enhanced track conditions in tender documents of an important customer, and has not planned to quote competitively for the standard and generic track offered by all competitors. Sport-Trax also suffers from paralysing confusion of the decision-making process of its key customers. The essential core of Marketing Strategy is in synchronizing all the elements of the Marketing Mix (Payne, 2002, p 122-180), so that it can meet targeted segment needs with competitive advantage. The athletic race track product has Product, Promotion, Price and Place elements. Process, People, Physical Evidence and Preferred Customer Services are the four Service Elements that can augment the Marketing Strategy. How can Sport Trax mix these elements together? The Rigor of Serving a Targeted Segment The case shows that the market for athletic surfaces has two major segments. One is of Universities and other public bodies which own and operate athletic facilities, and the other is of private developers, who are under pressure to provide athletic facilities in return for rights and licenses to carry on their businesses. Universities and public bodies will not have the same needs as private developers, and will not make business decisions in similar manner. Sort Trax has three strategic choices: a. Serve private developers with premium products and value-added services b. Choose to meet demands of Universities and public bodies by offering a stripped-down products with no more than base essential features c. Serve both segments Option c above involves high fixed costs and may not suit a company of the size of Sport Trax. Option b may not be sustainable because larger and consolidated competitors may use economies of scale to force Sport Trax out of business. The first option appears best and suits Sport Trax’s strengths. We can assume that private developers will provide sufficient opportunities for Sport Trax to grow and to make profits. We can also assume that the proprietary technology of Sport Trax cannot be copied and marketed by competitors. Thus a review of Strengths, Weaknesses, Opportunities and Threats (SWOT) shows that Sport Trax should focus resources on promoting durable athletic tracks to private developers. The company should save time and money and not follow tenders for generic products. The price element of Sport Trax’s Marketing Mix should reflect the value of additional durability. It will not be feasible for Sport Trax to maintain its modest single-digit profitability by offering a premium product at a generic price. Tender bid information tends to get around through secretaries much as the company sales person was able to access tender specifications. Sport Trax will suffer once developers know that the company is willing to offer a premium product at a generic price. Sport Trax may offer volume discounts to private developers in return for booking the new surface for a number of sites, thus effectively shutting out the competition. The Promotion element of the Marketing Mix needs major overhaul in Sport Trax. There has to be a focus on Associations with influence in the field of Athletics, getting them to endorse the new surface. There is a lesson for the company in the decision to test the product at a rival University of their main client. Star Trax should concentrate its promotion budget on influencer support and ensure that it understands corporate decision-making processes and positions in organizations of key clients. Sport Trax can also consider building budgets to sponsor events and to make its brand name visible in key customer circles. The company sales person had to depend on customer files and a secretary to find out that it had satisfied customers! It should procure endorsements from such clients and use their statements for word-of-mouth promotion. It can use the Internet to spread awareness at low cost, of the technical superiority of its product. Private developers are likely to depend on contractors for decisions related to athletic track surfaces. The matter may be too incidental and small for developers to take more than a passing interest, as happened with the University Bursar. Contractors will also be better than Sport Trax at keeping tabs on new projects and tenders. The best in industrial selling do not wait for tender documents to arrive in their offices to know that big business is brewing! Contractors would have networks in place which cover developers regularly, and may enjoy having an additional product line. There is no evidence that Sport Trax has ever considered the Distribution element of the Marketing Mix, but it is time to do so. Sport Trax should consider a number of options, ranging from commission based distribution rights to the binding association of equity placement, to bring distribution strength to its Marketing Strategy. Persons are the most important element of the Services Marketing mix for Sport Trax. The transcript of the sales person’s call records is really shocking! The company must retrain its sales force, or get a new one! Each sales person should have a list of customers he or she is supposed to cover. Call frequencies and outcomes should be monitored through formal and written reports. Sales people should know about their client organizations as well as they know Sport Trax, and be directly accountable for bringing in information on new clients and information on projects. Key clients should be serviced by alternate personnel when one individual goes on planned leave. Sales people should be trained in how to detail products, and pay-off lines should be determined through professional and primary research, rather than as per the whims and fancies of the Commercial Manager! We do not know about the remuneration policies of Sport Trax, but there have to be incentives for sales people to perform. The team will need to be motivated to behave in a professional manner, and not land the company in the kind of fire fighting it has witnessed in the recently lost tender. All tenders cannot be won in a business, but Sport Trax should have known that the University was planning a new track surface. The company should have made its case to the University before the tender was specified, rather than wait for later. Decision-making procedures of the University should have been known, and key positions should have been met regularly in the past. Friendly contacts of sales people should have been oriented towards business objectives. The Process elements of the Marketing Mix need basic review. The company will need to document how Marketing decisions are to be taken for competitive advantage. Though Sport Trax is a company of medium size, it still needs professionalism in how it operates. The hierarchy seems to be unclear, and crucial decisions on who should service a key client are taken art private business lunches! The Commercial Manager needs a structured Job Description. Sports Trax seems to take Marketing rather casually and it cannot afford to keep doing so, assuming that it is committed to handling the function directly. All Industrial selling calls for excellence in the Preferential Customer Services element of the Marketing Mix; this principle has relevance for Sport Trax in full measure. Key decision makers in client organizations should be treated as Commercially Important People, and there should be strong professionally bonding between them and the company. The alienation of Sport Trax from crucial decision makers in the University should not be allowed to happen again. The Physical Evidence Mix of the Marketing Strategy of Sport Trax calls for selecting representatives either from numbers of former athletes or from engineers and chemists with strong technical credentials. This may be the case already-we do not know the educational and professional backgrounds of the sales force members. Suffice it to say that clients should be met by people who reinforce the image of Sport Trax as an authority in its field. The eight elements of the Marketing Mix should be followed by a documented Marketing Plan, with annual budgets and monthly targets tied in. This completes a description of the entire process by which Sport Trax should make Marketing Strategy. It continues to have the option of hiving off the function of Marketing to an outside firm of consultants, but will need to commit adequate and qualified human resources if it wants to do a proper job on its own. Business Definition A strategic decision on who should be responsible for Marketing Strategy may be helped by a review of the business in which Sport Trax would like to be. The environmental information seems to indicate a limited UK market for athletics tracks. The company may have to consider operations in other countries, such as Australia and Canada, where sports lovers abound, but it would involve enormous infrastructural costs that a company of the size of Sport Trax may not afford. This would naturally apply to the United States as well. Another and more affordable option would be to introduce new product lines relevant for athletics. These could be sourced from independent manufacturers, though exclusive access and brand name ownership would be issues for the Management to consider and safeguard. A third option would be to branch in to new lines of business in which the company’s technology can be put to new and additional uses. Such new business could be done in entirely new organizations spawned off from Sport Trax or its holding structure, so that the identity of specialization in athletic track surfaces is not lost. The shift from athletic track surfaces to surfaces for all sports, and from there to surfaces for other purposes such as lawns and patios for example, will lead to quantum jumps of market opportunity scales. We do not have adequate inputs to suggest a definitive course of action with respect to the scope of business that is appropriate for Sport Trax, but it is a decision that should be reviewed even before Sport Trax starts to repair the damage it has suffered from an apparent lack of formal Marketing expertise in the company. Marketing Strategy should follow a decisive answer to the question on the kind of business that the company would like to engage in a horizon of a decade ahead and more. It is unlikely that being a supplier for athletic tracks in the UK will be a satisfying and adequate business mission for most entrepreneurs and investors. Though Marketing Strategy should follow the business definition, the initial environmental scan component should iterate with consideration of alternate widths of scope. This will bring a sense of consumer orientation in to the strategy crafting process. Sport Trax could discover, for example, that soccer commands so much more following than athletics, that it should turn attention to indoor surfaces on which the game can be played and followed in winter. Sport Trax may also find it expedient to follow independent strategies by time frame, milking the 2012 Olympics in London as a relatively short-term existing business opportunity, while also building a future business through Research and Development in an entirely new area. These are some of the strategic options before the investors and owners of Sport Trax, which have to be settled before it sets about revamping its Marketing function. Price Points The thought of short term and long term business objectives in the foregoing section prompts ideas about operating price points. Learning a lesson from the recent University tender experience, the company can think of operating a generating surface product with a cost advantage strategy, independent of its proprietary product at a premium price. The implication is that the company would have a kind of generic arm that studies all bids and simply builds expertise in offering the bare essentials at unbeatable prices. It may be able to achieve this by outsourcing some parts of product assembly in order to gain cost advantage from relatively low cost areas of Great Britain, or even from third world suppliers. It is also possible that Sport Trax has large unused capacities which justify marginal costing for generic product tenders. Sport Trax should not load the generic product with any Marketing costs. It should simply ensure that people such as the University Bursar remember to post tender documents whenever they have a project. This can be done by one time registration and relatively low cost and infrequent customer contact. The heavy-duty Marketing Strategy which has been described in this document can be reserved for the durable surface to which Sport Trax has exclusive access. This product should not be quoted in tenders, which do not call for such premium specifications. This approach will follow the lead of most consumer durables, with products at each level of the price hierarchy. However, Sport Trax should reflect on its low quote for the University tender in the light of the difference in pricing of budget airlines and First Class on British Airways! Pricing is of vital interest to branding and better specifications should not be undervalued in the long term business interest. Marketing as a function should have a contribution-to-profit orientation, and this is the main value which Sport Trax seems to miss in its present organization. Organizational Effectiveness Informal and almost casual functioning is often the bane of smaller organization, and Sport Trax seems to be stuck in such a time warp (Hammond, 1994, pp 97-154). Since some inappropriate conventions seem to have been ingrained in the company, the transition to professional Marketing Strategy crafting and execution will have to be made with minimal damage to egos and to the spirit which seems to drive the firm. It is for the Head of the company to set an example. The instance in which a sales person to liaise with the University is chosen over lunch, should not be repeated. Territories for sales people should be set through the Head of Marketing, and the Head of the company should resist the ‘mom and pop culture’ of ad hoc decisions on operational matters, which also tread on the turf of others. A related matter is the function of the Commercial Manager. A company of the size of Sport Trax should be able to afford separate people for the Commercial and Marketing functions. Horizontal transfers are always healthy, and the present Commercial Manager can always be rotated through the Marketing function, but should not attempt two jobs at once. The Marketing Function has to be accountable to the company through the formal structure of the Management Committee, but to invite sales people to such a body would invite chaos if done on a regular basis. Restricting the work of the Commercial Manager, introducing a new center of influence in terms of a Marketing function, and introducing formal controls and systems on a sales force that is accustomed to going on leave in the heat of battle, are matters that will cause both heartburn and employee turnover if not handled appropriately. The company has to make a massive communication effort to ring in the change. The Marketing Strategy will not have teeth without widespread employee participation, understanding and support. It is normal for people to feel threatened by change, especially when the scope of work narrows or when accountability increases. The timing for dramatic changes is awkward, because employees may feel that there is a ‘witch hunt’ on after the loss of the University tender. The Management has the option of quick and forceful action, bringing in new recruits to manage the change. This will jeopardize short-term profitability, and may not suit Management style. The path to winning over existing employees, and persuading employees to follow professional Marketing systems can take for ever, and even a few recalcitrant employees can hold the firm to ransom. The market is not growing fast enough for the company to wait endlessly while present employees adjust to the ‘Marketing way’ of functioning. The trade-off between employee motivation and responding quickly to market opportunities is a hard one for the firm’s owners to make. The accreditation system of the International Standards Organization (ISO) offers an optimal solution (‘Case Studies’, 2002). The ISO 9000 and 14000 systems can enable the company to introduce professionalism in its Marketing, and indeed in all its operations, in a most non-invasive way for its employees. Competitors do not have ISO certification as far as we know, so the process will give stature and authority to Sport Trax. The documentation can only be completed with the full cooperation and involvement of the employees, though it will need top Management support for people to devote time to draft, discuss and revise working procedures. ISO will lend prestige to the professional abilities of employees, and will serve as incentives for them to support change. ISO is flexible and can be adapted to the needs of an organization. It seems that ISO can focus on Marketing in the first instance in the case of Sport Trax. Two possible impediments in the ISO approach are the appointment of an outside consultant and the allocation of renewable resources on an on going basis. It would be catastrophic to lose certification at any point, and hence Sport Trax will need to have a full time person and a significant annual budget set aside each year for ISO. Sport Trax most probably does not know about ISO, and will have to appoint an accredited consultant to prepare the company for ISO registration and certification. The substantial effort needed to realize ISO standards is worthwhile considering the benefits of a professional approach to Marketing, and assuming that the firm would not like to ring in changes with unpleasantness and separations. Incidentally, ISO requires direct and ongoing top Management involvement. The Head of the Company must opt for the system knowing that the position’s time will be used in significant measure to review progress and to endorse deployment of necessary resources. Recovery Whether the Management decides to adopt ISO, or to take a more direct approach to professionalism in Marketing, an audit of the operations of the company, including the loss of the University tender, seems inevitable. An audit can be conducted by a person such as the Commercial Manager, perhaps with the help of a consultant. It will yield a number of new ideas and also provide an opportunity for employees to review their own corrective measures. Benchmarking with other companies will also help Sport Trax appreciate where it stands in the market place. Again, benchmarking can be done by a company employee with some outside help of a functional expert. The sales person who handled the University tender has collected some information on how competitors reacted to the business opportunities. These inputs can be used by Sport Trax for direct benchmarking. The company may also benchmark itself against non competing companies, such as contractors, which are also in the business of quoting for generic business through tenders. This kind of benchmarking against non competing companies will defreeze employees from the trauma of their recent business loss, and help them to see the company’s shortcomings in the least unpleasant and demeaning way. Conclusions Crafting Marketing Strategy is a process. It starts with environmental scanning and a definition of business scope. Segmentation, Targeting, SWOT Analysis and elaboration of Product and Service elements are the main steps in arriving at a Marketing Plan that can serve as a blueprint for action. Implementing the Marketing Strategy is more difficult than writing a plan document. Any company may decide to outsource its Marketing to specialists. Implementing formal Marketing in a concern accustomed to unstructured working can be traumatic. The ISO system offers a method to wean companies towards higher standards of professionalism in all functions including Marketing. Audit and Benchmarking, both against competitors and with non competing companies, helps company employees upgrade their Marketing skills. References Hammond, TH, 1994, ‘Structure, Strategy and the Agenda of the Firm’, Fundamental Issues in Strategy’, edited by Rumelt, RP, Schendel, DE and Teece, DJ, pp 97-154, Harvard Business School Press, Payne, A, 2002, Services Marketing, Prentice Hall ‘Case Studies’, 2002, Transformation Strategies Website, retrieved April 2006 from http://www.trst.com/iso3.htm Read More